What do you use accounting for?

Every organisation needs to be accountable to its members for the use of
funds within the organisation. The members of the organisation place their
trust in the executive that funds will be used in an honest way to achieve the
goals of the organisation.

In the same way that you need to keep records of meetings, letters and
membership you also have to keep the records of the organisation’s money.
Accounting is the system for keeping the records [books] of all the money you
collect and all the money that you spend

Books have to be properly kept for four reasons:

To make sure that the organisation’s executive committee and members
can understand exactly what has happened to the organisation’s money.

To help the organisation to make realistic plans of what it can spend
and to monitor how the spending compares with the budget.

For accountability and transparency – most organisations use public or
donor money and should be able to show how every cent was spent

For security to avoid losing money to mismanagement, corruption or theft

Important things to know about accounting and
bookkeeping

The treasurer of an organisation is usually accountable for all the money
and must be able to give monthly statements of the organisation’s money at
executive meetings and an annual statement at the AGM.

Financial accounting means that:

You give regular reports to all those that have a right to know what the
organisation is doing with its funds.

The leadership of the organisation has the financial information it
needs to make decisions about budgets and spending.

You have documentary proof of receipts and payments of all moneys.

It is impossible to prepare statements if you do not have a clear and
accurate bookkeeping system. A good bookkeeping system depends on proof. It is
important that you keep every piece of paper connected with money that is
spent or collected.

The books you keep must show:

Income

- all the money that comes into the organisation
(fundraising, donations, bank interest, grants, subscriptions)

The transaction is recorded on a piece of paper as proof that it
happened – usually a receipt issued by you for money you receive or a
receipt issued to you by the supplier you pay for something.

The transaction is then recorded in an accounting book – for example a
cash book for all money spent.

A summary is made of all transactions and written in a monthly
statement.

A summary of the transactions for the year is written in an annual
statement.

To keep accurate books you should have the following;

A bank account with a cheque book

A daily record system with receipts and petty cash vouchers

A monthly record system with a petty cash book and a cash book for
recording and analysing income and expenditure

A format for annual financial statements

The rest of this guide covers how to do all the above things.

How to use a bank account

Having a bank account means that the bank is looking after your money and
you do not have to keep big amounts of cash. When you pay money into the bank
you make a deposit and when you take money out you withdraw from your account.

The best bank account to have is a cheque account since you will then get a
cheque book and can make most of your payments by cheque. If you have a lot of
money that you want to keep for a while it is best to open an investment
account as well where you will get better interest.

Opening an account

If you are part of a bigger organisation like a national organisation you
must follow the guidelines set nationally about which bank to use. It is
best for national organisations to use one bank because it makes transfers
between different parts of the organisation easier.

If you are a local organisation, choose a convenient local bank and open
an account in the name of your organisation.

The bank will usually ask for a copy of your constitution so that the
account can be in the name of your organisation. Organise with the bank that
3 people will be allowed to sign cheques and that any two of the signatories
must sign any specific cheque. You will have to supply copies of the ID
documents of the signatories.

The treasurer should be one signatory and the secretary and chairperson
the other two. Every time the treasurer needs to pay someone with a cheque
then he or she has to get the cheque signed by the secretary or treasurer as
well. This is a safety measure because 2 executive members then know what
each cheque is being used for.

Using a cheque book

When you have a cheque account the cheque book is used to:

Draw money out of the account:

you take a signed cheque to the
bank with the amount you need to draw out and the bank then gives you the
cash

To pay your accounts

: you give the person/organisation you owe money
a signed cheque for that amount. That person or organisation then pays your
cheque into their bank account. Use cheques to pay for amounts over R20. Any
smaller expenses, like tea or milk you can pay out of petty cash (see Petty
Cash).

When you make out a cheque you must always fill in the left-hand side of
the cheque (the stub) in as much detail as possible to show exactly what
that cheque was used for.

Never issue a cheque if you do not have another piece of paper to prove
what the cheque was used for, for example, an invoice from a catering
company.

Below there is an example of a cheque requisition form that you should
fill in to keep clear records for what cheques are issued.

Cheques should only be issued if:

You have filled in the cheque requisition form and attached the
invoice or account

The signatories have signed the cheque

You have filled in the stub in the cheque book

There is enough money in the bank

After paying make sure you:

File the requisition plus the documents in a file for cheque
requisitions

You write the transaction in your cash book

Putting money into the bank account

When you put money into your cheque account it is called making a
deposit. You go to the bank and fill in a deposit slip, which you get at the
bank. The bank will give you a copy of the slip and this must be kept in a
file for deposits for your financial records. Write the receipt number on
the deposit slip so that you can easily tell what money you deposited.

Bank statements

Once a month, usually halfway through the next month, you will get a bank
statement from the bank which is a record of all the cheques that were
issued in that month and of all the deposits that were made from your
account. So, on about 15 November you will get a bank statement showing all
your cheques and deposits for October.

You should use the bank statement to double-check with your own financial
records that everything is in order and you must let the executive see the
bank statement each month. Check that all cheques have gone through the bank
and that all deposits are recorded. Also record the bank charges and
interest under expenditure and income in your cash book.

How to keep daily records

The most important things that you need for your daily records are a
receipt book for recording income and petty cash vouchers for recording small
expenses.

A receipt book

- these are quite cheap and you can buy them at a
local stationery store. When anyone hands any money to the organisation you
must give him or her a receipt which shows the amount they gave you. You
give the original receipt to the person and leave the duplicate in your
receipt book. When you receive money deposit it in the bank as soon as
possible. It must never be used as petty cash. Keep the deposit slip as a
record and write the receipt number on it. Here is an example of a receipt:

Number 2365

Received from: …………………….. ………………….

The amount of: …………………………………………

For: ……………………………………………………..

Date ……….

Rands

Cents

Petty cash vouchers

- you should always keep some money for small
payments. If you need R5 for stamps or milk you will use petty cash to make
these payments. Petty cash should only be used for small expenses – pay
everything else by cheque since it is much safer. The executive should
decide how much money should be kept as petty cash. The treasurer should use
a cheque to draw enough out of the bank each month for petty cash. This
could be R50 to R100 depending on what money you spend each month on small
things.

The executive should decide how much money must be kept in petty cash and
whatever is spent each month should be put back into the cash box by the
treasurer. This is called an imprest system.

All the petty cash that is spent must be recorded on a petty cash voucher
which you can buy cheaply from a stationery shop. The till slips, cash slips
or invoices that you get when you pay for something must be kept as well.
These slips should be pinned onto the petty cash vouchers.

Petty cash voucherDate ………………

What was money spent on

Amount

Signature
……………………………….Name
………………………………..
Attach cash slip.

How to keep monthly records:

A petty cash book

At the end of each month the treasurer should record the information from
all the petty cash vouchers into the petty cash book. You can use an
ordinary school exercise book for the petty cash book. Make TWO columns on
the right hand side of a page called INCOME and EXPENDITURE. Here is an
example:

Petty cash book for April 2001

Date

Details

Income

Expenditure

TOTALS

Balance: beginning of the month
[carried over from last month] …………
Balance: end of month [previous balance plus Income minus expenditure]
…..

Under INCOME write in the amount the treasurer drew out of the bank and put
in the petty cash box. Under expenditure record all the petty cash vouchers.
At the end of the month you must also balance the petty cash book.

To balance the petty cash book you must:

Add up the expenditure column to get a total. This is called TOTAL
EXPENDITURE.

Add together the balance you had in the beginning of the month plus the
income during the month. Then subtract the total expenditure from this
amount. This is the BALANCE at the end of the month.

Check that the balance is the same amount as the money left in the petty
cash box.

The treasurer must then go to the bank and draw out the amount under total
expenditure so that the petty cash box has the same amount of money again.
This must be recorded under INCOME on the page in the petty cash book for the
next month.

A cash book

A cash book is a record of all the money that moves in and out of your
bank account. It should show what money you have received, what money you
have spent and what amount is left over. You should also use your cash book
to check the bank statement

At the end of each month all the records you keep should be recorded in
one book called the cash book which you can buy cheaply from a stationery
shop. You can also make your own cash book.

The records in the cash book include all the bank deposit slips, cheques,
receipts and petty cash book. The deposit slips are the records for the
INCOME. Income can also come from other people depositing money in your
account or from interest paid by the bank – look for these on your bank
statement.

The cheques and the petty cash book are the records for the EXPENDITURE.
Expenditure like bank charges and debit orders will be shown on your bank
statement.

The Income as well as the Expenditure is recorded in the cash book. You
use two pages each month. The whole of the left-hand page is the income side
of the cash book and the right hand page is the expenditure side of the cash
book:

Example of the Income side of the cash book (left hand page)

The income side is called the debit side. In this example there are five
main columns on the income left hand page:

Cash book April 2001 INCOME

Document number

Date

Details

Fundraising

Donations

Grants

Subscriptions

Bank

TOTALS

Receipt or voucher number

Date of transaction

Details - the name of the person or organisation who gave the money

Analysis columns [the ones that are not in bold]: This tells us what
kind of income it was and it should be written in the correct section. For
example fundraising, donations, grants, subscriptions.

Bank column: write every item’s amount in the right column as well as
in the bank column when you deposit the money.

Before you write your income side of the cash book, make sure you have:

The bank statement for that month

Deposit slip copies for that month

Receipts of money received for that month

Example of the expenditure side of the cash book (right hand page)

The expenditure side of the cash book is called the credit side.

Cash book April 2001 EXPENDITURE

Cheque number

Date

Details

Petty cash

Work-shops

Campaigns Costs

Stationery

Bank

TOTAL

All the cash and cheque payments and bank charges should be recorded on the
expenditure page. In this example there are 5 main columns on the expenditure
page:

Cheque number: the actual number of the cheque, not the amount

Date of each cheque

Details. Write the name of the person/organisation to whom the cheque
was made out and what the cheque was used for e.g. Catering for workshop.

Analysis. The analysis columns [the ones that are not in bold] tell you
what your expenses were for example running costs, stationery, transport,
catering and so on. You must decide how many columns you need and what
headings to use for each. Make sure that you have the main types of
expenditure that you will have in the office: Running costs, Stationery,
Workshops, Campaigns, Sundries.

Bank column: Write down any withdrawals from the bank. All expenditure
should be written in the right analysis column and in the bank column.
Bank charges are always recorded under sundries.

To write the expenditure side of the cash book you will need:

The bank statement for that month

The cheque requisition file

The cheque book stubs

Balancing the cash book - reconciliation

After writing your cash book you must draw a line under each side and add
up the totals. Then you must work out the balance of what you have left over.
You do this writing down the following:

Balance at the beginning of the month

_____________

Plus income total for that month

_____________

Sub-Total

_____________

Minus expenditure total for month

_____________

Balance at the end of the month

_____________

Next month your end balance will become your balance at the beginning of
the month.

Adding up the analysis columns

The analysis columns tell us what kind of income and what kind of
expenditure there was. This will help us to answer questions like how much
money did we get from province or region in one month or how much did we spend
on running costs in one month. To answer this you need to have the totals for
each column added up at the bottom. When you add all column totals together
they should be the same as the total for the bank column.

Bank reconciliations

You should also look at the bank statement and make sure that that cash
book and bank statement show the same balances. Remember that your cash book
may be ahead of your bank statement since some people may not have cashed the
cheques you made out to them. So write your bank reconciliation like this:

Balance on bank statement:

__________

Minus outstanding cheques:

__________

Real balance:

__________

The Real balance should be the same as the one in your cash book at the end
of the month.

Monthly report backs

The treasurer must give a monthly report to the management or executive
on the income and expenses for the organisation the previous month. All the
books should be up to date for the report back. The treasurer should have
the slips, bank statements, chequebook and stubs, invoices, petty cash
vouchers, receipts, etc. at the meeting in case of questions.

How to do annual financial statements and audits

At the end of each year you should prepare a financial statement for the
organisation where you can give a complete picture of the income, expenditure
and balance for that year. Income should be broken down into donations,
fund-raising, and subscriptions. Expenditure should be broken down into
running costs, stationery, workshops, campaigns and sundries which will
include bank charges.

The treasurer should present the financial statement to the AGM in a way
that makes it easy for people to understand. Write a summary up on newsprint
and explain what is meant by each item so for example, if you spend R500 on
running costs, give people an idea of what these costs were. If you raised
R5000 in fundraising give people a breakdown of which events contributed what.
It is also a good idea to give people a copy of the most recent bank statement
so that they can see the balance for themselves.

If it is possible you should organise for an independent accountant to
audit your books every year to make sure that you are doing everything
correctly and so that you can prove that none of the organisation’s money
has been misused. Audits cost money so it is best to ask for a volunteer to
assist with this, for example the accountancy teacher at the local high school
can help you.

How to make sure your money is secure

It is very easy to steal money from organisations. This can happen in a
number of ways:

people can withdraw money with cheques that were issued without checking
that the proper documents existed

people can use the organisation’s cheques for their private purposes.
This is one of the reasons why it is very important to insist that two
people must sign every cheque.

people can overcharge the organisation for things like catering if the
treasurer does not check the invoices and records and also checks that the
workshop or event actually happened and that the caterers provided the
amount of food they invoiced you for.

people can steal money from petty cash.

people can take donations and pocket them if they do not have to issue a
receipt

It is very important that the treasurer takes responsibility for the
safekeeping of the organisation’s chequebook and money. He or she must make
sure that every single payment that is made is legitimate and that the proper
documents exist for these. Never pre-sign a cheque and give it to somebody
else with signing powers unless you are very sure what the cheque is for. The
other signatories are there for your security and the branch’s security –
you must always be one of the signatories for any cheque.. It is best that you
make out the cheque in their presence and that you sign it together. Only two
signatories need to sign so if one signatory is sick or away the other one
should be there.